Wednesday, April 8, 2009

New Economic Research

Mark Thoma (Economists View)references this paper:


Well, Wow, what an astonishing paper! I read the whole thing, but will be reading this two or three more times.

What is the implication? If fiscal and monetary authorities misinterpret a structural change as animal spirits, then their efforts are likely to be counterproductive. Another implication is that households will willingly undergo a deflationary restructuring if their view of the future is a better equilibrium.

The consumer's model of production is more sophisticated than macroeconomists have assumed. The caveat if that there are more than one set of important consumer groups.

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